Competitive Dynamism in Nascent Markets: Trademarks and Superstar Firm Entry in the Metaverse

Abstract

Does entry by a superstar firm change the competitive dynamics of nascent industries? Using USPTO trademark data and a quasi-experimental design, we explore this question by analysing the development of new products and services in the metaverse. We develop a theoretical framework of heterogeneous strategies for market entry under uncertainty, contrasting competition in digital vs. physical industries. Empirically, we show that firm size has a strong positive correlation with metaverse participation among U.S.-based trademarking firms, and that this effect is amplified for born-digital and global, physical-goods firms. However, following Facebook’s entry in 2014, we document a 10% decline in metaverse engagement; decomposing this average effect, larger and born-digital firms were minimally impacted, while globalized physical-goods firms experienced the largest declines. These results suggest that physical-goods firms are much more sensitive to superstar entry than digital-goods firms in nascent markets. Our analysis contributes to the understanding of intangible assets as key drivers of firms’ competitive advantage in the global, digital economy.

Keywords: trademarks, innovation, virtual worlds, metaverse, technological change

JEL Classification: C38, L26, M13, O34